With a house purchase near Denver in the works, the 38-year-old engineering contractor plans to restart his family's future 1,200 miles away from his home state's lemon groves, sunshine and beaches. For him, years of rising taxes, dead-end schools, unchecked illegal immigration and clogged traffic have sapped the allure of the place writer Wallace Stegner once described as "America only more so."

Since the days of the Gold Rush, California has represented a sort of Promised Land, an image that fair or not is celebrated in the songs of the Beach Boys and embodied in the stars that line Hollywood Boulevard. Gov. Arnold Schwarzenegger calls the state the "golden dream by the sea."

But for many California families last year, tomorrow started somewhere else.

The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.

The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.

California's loss is extremely small in a state of 38 million. And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S., according to state demographers.

A losing streak that long hasn't happened in California since the recession of the early 1990s, when departures outstripped arrivals from other states by 362,000 in 1994 alone.

In part because of the boom in population in other Western states, California could lose a congressional seat for the first time in its history.

Why are so many looking for an exit?

Among other things: California's unemployment rate hit 8.4 percent in November, the third-highest in the nation, and it is expected to get worse. A record 236,000 foreclosures are projected for 2008, more than the prior nine years combined, according to research firm MDA DataQuick. Personal income was about flat through three quarters last year.

With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates. One multibillion-dollar project in downtown Los Angeles has stalled, and office vacancy rates there and in San Diego and San Jose surpass the 10.2 percent national average.

Median housing prices have nose-dived one-third from a 2006 peak, but many homes are still out of reach for middle-class families. Some small towns are on the brink of bankruptcy. Normally recession-proof Hollywood has been hit by layoffs.

"You see wages go down and the cost of living go up," Reilly says. His property taxes will be $1,300 in Colorado, down from $4,300 on his three-bedroom house in Nipomo, about 80 miles up the coast from Santa Barbara.

California's obituary has been written before — "California: The Endangered Dream" was the title of a 1991 Time magazine cover story. The Golden State and its huge economy — by itself, the eighth-largest in the world — have shown resilience, weathering the aerospace bust, the dot-com crash and an energy crunch in recent years.

But the grim economic news of recent months begs questions about what's to come, even if the reality of life in the nation's most populous state has always been different than the myth.

"That's what dreams are about — they don't always come true and there can be a light and dark side to them," says historian William Deverell, director of the Huntington-USC Institute on California and the West. "At any given moment, California can reflect the best and worst of American possibility."

Lately, it seems more of the worst.

A state board halted lending for about 2,000 public works projects in California worth more than $16 billion because the state could not afford them. A report by Sen. Barbara Boxer, D-Calif., last month said the state lost 100,000 jobs in the last year and the erosion of home prices eliminated over $1 trillion in wealth. Census data for 2005 through 2007 shows nearly one in five people in California did not have health insurance, ranking it seventh nationally in the percentage of residents lacking coverage, just behind Mississippi.

There's no dictionary definition for the California dream. It's typically depicted as an enviable quality of life where prosperity is within easy reach, sunshine is abundant and harmony prevails. It's idealized in the "Gidget" movies of another generation and today's magazine spreads of celebrities in Malibu. California often shows up in extremes, paradise or hell, "Baywatch" or "Blade Runner."

"I don't think the California dream, per se, is over. It has become and will continue to become grittier," says New America Foundation senior fellow Gregory Rodriguez. "Now, perhaps, we have to reassess the California of our imagination."

Schwarzenegger is among those who say the state needs to create itself anew, rebuilding roads, schools and transit.

"We've lived off the investments our parents made in the '50s and '60s for a long time," says Tim Hodson, director of the Center for California Studies at California State University, Sacramento. "We're somewhat in the position of a Rust Belt state in the 1970s."

Financial adviser Barry Hartz lived in California for 60 years and once ran for state Assembly before relocating with his wife last year to Colorado Springs, Colo., where his son's family had moved.

"The saddest thing I saw was the escalation of home prices to the point our kids, when they got married, could not live in the community where they lived and grew up," Hartz says. "Some people call that progress."